For clients of the 2plan Managed Portfolio Service
Quarterly portfolio update
If you have any questions, please contact your 2plan Financial Adviser.
Performance update: Q2 2026
Our latest quarterly video provides a review of financial market performance in Q2 2026.
Learn more about our speaker and access a transcript below.
This webinar is for information only and should not be taken as a recommendation or advice on how any specific market is likely to perform. Past performance is not a reliable indicator of future performance.
Video transcript
Speakers
- Britt Holland-Ellice – Strategic Account Director, Rathbones
- Ronelle Hutchinson – Senior Investment Director, Rathbones
Transcript
Investment opportunities in emerging markets
Britt: We've talked a lot about geopolitics. Beyond the opportunities created in that environment, where do you currently see the most compelling investment opportunities? What's your highest conviction view at the moment?
Ronelle: Thanks, Britt. That's a really good question. If you look at how we've transitioned portfolios during the last six months, we've moved from being underweight emerging markets to overweight emerging markets. That remains a very strong call for us.
From a bottom-up perspective, we're seeing strong fundamentals and earnings across emerging markets. In particular, technology and energy-related industries in regions such as South Korea and Latin America have benefited from upward earnings revisions.
Valuations are also attractive. Emerging markets are generally cheaper than many other regions and remain relatively under-owned by investors. When you combine strong earnings expectations, attractive valuations and relatively light investor positioning, we believe the case for an overweight allocation to emerging markets is compelling.
Portfolio protection during market volatility
Britt: If markets become more volatile from here, where do you expect portfolio protection to come from?
Ronelle: It's something we think about continuously. Within portfolios, we maintain healthy allocations to fixed income and alternative investments. These asset classes are generally less correlated with equities, helping to diversify returns and provide stability during market drawdowns.
We've also seen a significant repricing of interest rate expectations. Higher starting yields and the repricing of inflation and interest rate expectations make fixed income, particularly longer-dated fixed income, an effective source of portfolio protection.
Alternative investments also play an important role. Hedge fund managers can take a more dynamic and active approach to markets, which can help provide additional diversification and resilience during periods of volatility.
Portfolio performance through changing market conditions
Britt: The first quarter was challenging for many investors. Looking beyond the headlines and performance numbers, what has actually pleased you most about how the portfolios have behaved?
Ronelle: What has pleased us most is how the portfolios performed across very different market environments. During the first quarter sell-off, the portfolios were relatively defensive and outperformed all of their IA peer group benchmarks.
Then, when markets rebounded strongly during the second quarter, we were still able to participate meaningfully in the recovery despite maintaining a focus on downside protection.
That combination of protecting capital during weaker markets while still participating in rising markets is exactly the type of return profile we aim to deliver. It's a strong reflection of how we approach portfolio management.
Helping clients navigate uncertainty
Britt: Advisers often face client questions when short-term performance is affected by market volatility. What should advisers focus on when discussing performance with clients today?
Ronelle: The key is to focus on the longer-term picture. History shows that markets often react negatively in the early stages of geopolitical events, but they typically recover strongly over the following 12 months.
While volatility can be uncomfortable in the short term, historical experience suggests that it is often temporary. Over a 12-month period, markets have tended to move higher on average. That's why it remains important for clients to stay invested and remain diversified rather than reacting to short-term market movements.
Hidden risks within MPS portfolios
Britt: Looking across the MPS market, where do you think investors might be taking more risk than they realise?
Ronelle: One area we are watching closely is the significant move towards passive investing. Passive strategies can provide efficient market access, but they can also introduce concentration risk.
We are currently seeing considerable dispersion in market returns, and investors may not always realise how concentrated some passive exposures have become. It's important to understand where those concentration risks exist and whether portfolios contain exposures that behave similarly in different market environments.
High allocations to equities and credit, for example, can often become highly correlated during periods of stress. Investors and advisers therefore need to consider concentration risk, correlated return profiles and the importance of genuine diversification when reviewing portfolio risk.
Performance update: Q2 2026
Learn more about our speakers
Britt Holland-Ellice
Strategic Account Director
Ronelle Hutchinson
Senior Investment Director
Watch previous quarterly updates
If you have any questions, please contact your 2plan Financial Adviser.
Q1 2026
Ronelle Hutchinson:
How did markets perform during the first quarter?
Asset class returns were mixed over the quarter. In the chart we show on the left hand-side that gold was up 9% as investors fled to safe-haven assets. The UK and Japanese equities managed to hold onto gains ending up over 2 and 3%, and UK inflation linked bonds with their built-in inflation protection rose 2.6%. On the opposite end of the spectrum, equities in China fell 7%, the S&P 500 shed 2.5% in pounds and UK Gilts fell 1.8%.
What has been the impact of the Iran War?
What is obviously missing in the previous chart is the performance of energy prices. In this chart, we show how the escalation of the conflict in Iran reverberated through energy markets causing oil and gas prices to rise sharply over the period.
Leading indicators of global economic activity like global Purchasing Manager Indices, which we show in this chart, were healthy prior to the US strikes on Iran but higher energy prices will indeed be a headwind for growth. If oil prices remain elevated averaging $90, this is estimated to subtract just over 0.1 percentage points from global GDP. However, the impact will differ by country. Energy importers are likely to be affected worse than energy exporters and the US as the world’s largest producer of oil and natural gas is likely to be more resilient.
While Inflation in the UK was slowing before this shock, higher energy prices will put upward pressure on inflation. We estimate that if oil prices remain higher for longer, this could add around 0.5PP to UK inflation over the near term. This is without accounting for natural gas that is delayed by the price cap. Hence inflation is likely to remain elevated above the 2% target.
Higher energy prices may rule out interest rate cuts in the UK. While in the US, expectations have been dialled back to a lesser extent. Despite growth being weaker, the BOE has less policy flexibility vs the US given its sole objective of inflation control.
How have models performed over the last quarter?
Despite the challenges of the 1st quarter, the 2plan Core model portfolio range provided better portfolio protection vs the peers amidst this market sell-off. This resilience was a result of our focus on diversification and defensiveness amidst heightened volatility.
The main detractor to returns was equity selection within our passive index exposure in the US for example and Global this is via the L&G Global and US indices, passives were hardest hit, UK Gilts also detracted as UK gilts yields rose as markets priced in higher inflation and rate hikes. On the positives, the portfolio benefitted from inflation linked bonds and high yielding EM debt. Within Equities – UK equities, our allocation to Europe and emerging markets contributed.
Over the one year, performance remains competitive across the risk bands and broadly in line with the peers from Defensive to Moderately Cautious whilst ahead in the Balanced and Adventurous models.
Since inception, portfolios have delivered strong cumulative outcomes relative to benchmarks across the risk profiles. This is despite a volatile macro environment.
What is the outlook for markets and asset classes?
Turning to asset allocation and the current positioning, while we have made no shifts in asset classes overall remaining neutral on equities and overweight alternatives and bonds. It’s within asset classes, that we have been more active. Within equities we reduced our overweight to Europe and neutralised our underweight to Emerging markets.
Over the last year, we have benefited from our overweight position in Europe but the sharp rise in energy prices is likely to lead to a weaker growth backdrop which increases risks.
While Emerging Markets are more diversified, it has energy exporters as well as importers, cheaper AI beneficiaries and hence more flexibility to provide earnings and growth protection.
Within alternatives we have strengthened our portfolio protection introducing a more dynamic hedge fund manager to replace an existing multi-asset fund.
Q4 2025
Ronelle Hutchinson: Looking back on 2025, it was a strong year for risk assets across the board.
Commodities, specifically gold, had a stand out year as investors rushed to safe have assets amidst the tariff uncertainty and geopolitical risks.
Equities in the rest of the world, that is Europe, emerging markets and the UK outperfomed up over 20% in pounds exceeding the returns from the S&P 500 up 9% which was weighed down by dollar weakness. The dollar depreciated 7% vs the pound and UK gilts ended up close to 6% with falling inflation and lower interest rates offsetting the fiscal risks that plagued bonds over the year.
Overall a positive year for equities supporting high nominal returns for clients invested in multi-asset portfolios.
For avid market followers, one of the most surprising outcomes of 2025 has been the extent to which global economy has weathered the US tariff shock. Global GDP data in the chart on the left shows an outlook of slower but resilient growth. In the chart on the right, we show the new manufacturing orders from the global purchasing manager indices which has rebounded sharply after the dip in the first quarter.
For the full year, 2plan models have delivered strong returns with high nominal returns ranging from 7% - 14% that investors will no doubt appreciate.
Relative to our peers however, our lower risk models that is defensive to moderately cautious has marginally lagged the peers, while our higher risk models, balanced and adventurous have outperformed.
Going into 2026, we are mindful of elevated valuations as well as earnings expectations in the US, outside of the US, the UK & Europe reflect better value however, following the strong returns in 2025, the market will be anticipating a recovery in economic growth to support this outlook for improved earnings.
On the other hand the US market is unusually concentrated by past standards, with the largest 10% of stocks by market capitalisation now making up over 75% of the total US market. Positive performance over recent years has been reliant on the results of a small number of constituents driving the majority of returns.
The chart on the right-hand-side illustrates this. Less than 30% of the stocks in the S&P 500 have beaten the index in 2023 and 2024. 2025 has seen a very slight broadening out but this is still very much a narrow market by historical standards.
From an asset allocation perspective, we retain our neutral equity position following the strong returns in 2025. We maintain our overweight the exposure to fixed income and alternatives, this is largely because of the risks emanating from exuberant sentiment what we’re seeing reflected in low credit spreads and the overweight retail investor positioning, not to mention the heightened geopolitical risks that continue.
Q3 2025
Ronelle Hutchinson: Good morning and welcome to our MPS update for the 3rd quarter. My name is Ronelle Hutchinson, and I'm joined by Andrea Yung.
So how did markets perform during the 3rd quarter? Over the 3rd quarter, there were strong gains in global equities led by technology and emerging markets, and this was fuelled by the easing trade tensions. Chinese tech stocks rallied, driving the MSCI China index up 22%. Gold was up another 18%, bringing the year-to-date gains to an impressive 35%. Major indices like the S&P 500 up over 9% and the FTSE All Share up close to 7% reached record highs over the quarter. On the negative side, however UK gilts were down 0.5%. Guilts were weighed down by the higher inflation prints over the quarter. But overall, it's a positive quarter for equity returns and indeed for client portfolios.
If we zoom into the UK stock market returns for the year to date, Despite the negative newspaper headline, has delivered one of the best year to date returns in 30 years, up 15% and substantially benefiting client portfolios in a year where dollar weakness has offset the gains from US equities.
So, if we move to the next slide. Andrea, how have the models performed over the last quarter?
Andrea Yung: So similar to markets, it's been a very strong quarter for portfolios. We can see our medium risk portfolios returning around 5% and that's just over the quarter alone. That's been driven by momentum in equity markets. AI stocks have driven returns, which has meant that our exposure to the US market has been a big contributor, as well as our exposure to Asia, most notably China, which has delivered double digit returns over the quarter.
Now we aim to ensure that portfolios remain diversified and resilient across all market conditions. The protection that we embed into the portfolios means that sometimes when we see very strong markets, especially that are momentum driven, we won't outperform in the short term. However, we aim to provide a degree of protection to portfolios when markets fall or experience volatility. So therefore, we're pleased to see that we've kept pace with the wider benchmark this quarter.
Now if we move on to the next slide, we can reflect on how our portfolios have performed over the last 3 years since inception, and we can see that we've either been able to keep pace or beat the benchmark, and that's been net of fees. We've been able to do this while offering a smoother journey. So hopefully this consistency and performance just highlights how our risk management philosophy actually translates into real outcomes when it matters most.
Ronelle Hutchinson: So, what is the outlook for markets and asset classes going into the 4th quarter?
After the strong year to date gains in equity markets, we remain cautious on the outlook for risk assets. As a result, we have a neutral allocation to equities. Looking at the US, we have used the relative weakness of US equities in pounds to add to US equities in 2plan portfolios, bringing this to neutral and aligning closer with the two 2plan global asset allocation. We remain overweight, European equities, leaning into some of the positive developments in the region, such as the fiscal stimulus, the lower interest rates, and the relatively cheaper valuations that we're getting in this region. We remain overweight alternatives favouring relative value strategies that can mitigate volatility and limit drawdown risk. We remain overweight fixed income, but we are short duration. We are very much mindful of the heightened bond volatility that we've seen this year.
Andrea Yung: So, taking into account our asset allocation views, we've made a few adjustments to our portfolios over the past quarter, and that's to help strengthen diversification and support long-term resilience.
So firstly, we've broadened our European exposure. Our outlook for the region remains positive, and we can see the region benefiting from significant structural support, and that's thanks to the increases in defense and investment spending announced earlier this year. We believe that markets aren't pricing in a strong economic rebound just yet, which means that Europe is still offering value.
So, we've also increased our allocation to the US, bringing us closer to a more balanced position. This exposure remains well diversified, including a mix of high-quality companies across different sectors, so we're not just being concentrated in one particular area of the market. Lastly, to further strengthen the portfolio's resilience, we've added to a fund that focuses on capital preservation, and it's designed to perform well in a variety of market conditions, and it tends to behave differently from traditional equities.
So, this helps to cushion the portfolio drawing more volatile periods and supports more stable returns over the long term. So, with those changes, we believe as we move into the final quarter, we're well positioned to face any uncertainties or volatility in markets.
Ronelle Hutchinson: We’d like to thank everyone for joining us today and hopefully we'll see you at the next quarterly update.
Q2 2025
Ronelle Hutchinson: Absolutely, markets appear to have shrugged off the worst of the tariff uncertainty and geopolitical risks, to climb higher, but what continues to be uniquely different this year, is the extent to which international Equities have dramatically outperformed the U.S.
Europe is up +12.5%, the UK is up 9% and this is all vs the S&P 500 which is down 3% in pounds. Part of this outperformance is due to the weakness of the U.S. dollar with the dollar ending the first half down almost 10%. Commodities on the other hand, have sustained their performance with gold up over 13%, providing a buffer to the trade tensions, inflationary risk, and geopolitical challenges that we have seen this year.
While we remain marginally underweight US equities, over the quarter we have used equity weakness to upweight US equities in the 2plan portfolios and align closer with the new Global SAA. We continue to be overweight European equities, leaning into the improved outlook in the region due to fiscal spending and lower interest rates. With valuations also fairly undemanding in this region, we have maintained our exposure to alternatives but have enhanced protection focused on relative value strategies to limit portfolio volatility and drawdown risk. In addition, we remain overweight fixed income but are shorter duration relative to the benchmark. This is due to the higher levels of bond volatility, potentially higher inflation, and the higher levels of government debt that we’re seeing this year.
Sustained strength in the US economy and better than expected earnings growth is a real risk to our US view. European growth is disappointing with fiscal spending under-delivering and weaker consumer demand, will be a risk to our overweight Europe view. Over the next couple of months, we’ll be watching economic data like GDP and purchasing manager surveys, consumer confidence and retail numbers to determine consumer demand. We’ll also be watching inflation and the extent to which this will impact the likelihood of central banks cutting interest rates. Clearly a lot to keep us keenly focused on market developments and focused on delivering the right outcomes for your portfolios.
Andrea Yung: Our portfolios have delivered positive returns overall, despite experiencing some market volatility over the past three months.
Markets were unsettled by concerns around U.S. tariffs, which triggered a sharp sell-off at the beginning of April. However, a strong earnings season, particularly from major US technology companies, helped global growth stocks recover significantly.
Because we had consciously reduced our exposure to these growth stocks earlier this year, we didn’t fully participate in that rebound. However, this was a conscious decision aimed at prioritising portfolio stability during a very volatile period, and we believe that approach proved effective. Especially when looking at how our portfolios have been able to protect during periods of market weakness.
This slide illustrates how our portfolios performed during periods of market stress. The shaded areas highlight significant market declines, such as in April, where you can see our portfolios demonstrated greater resilience. This drawdown protection is a key part of our risk management strategy, helping to preserve capital and support long-term performance.
When we review performance since inception, our portfolios have consistently outperformed their benchmarks across all risk levels. This reflects our commitment to delivering strong, long-term results through a disciplined focus on managing downside risk and achieving attractive risk-adjusted returns.
Firstly, we've taken a more global approach to equity investing. As a result, we’ve reduced our exposure to the UK and we’ve increased our investment in overseas markets, particularly in Europe, this is where we see strong potential going forward. This global approach should enhance our potential to seek stronger returns.
Secondly, within our bond exposure, we’ve made adjustments to help manage both credit and currency risk. We’ve reduced our holdings in corporate bonds. Instead, we’ve reinvested into more global government bonds that are currency-hedged, and we believe this will provide greater stability in today’s environment.
Finally, we’ve reduced exposure to property and added funds that we believe will offer better protection if markets become volatile. These types of funds are designed to help cushion the impact during downturns. While they may not lead the way if markets rally, we believe they play an important role in reducing overall volatility and preserving capital during periods of uncertainty. These types of funds are there to help cushion the portfolio during periods of market downturns.
Overall, these changes are designed to ensure that the portfolio is well-balanced and resilient as we move through what could be a more challenging second half of the year, especially if we see increased geopolitical tensions and impacts from the US trade agreements.
Q1 2025
Ronelle Hutchinson: Coming into 2025, markets were confident that Trump would have a positive effect on US growth sustaining the expectations embedded in US valuations, but the scope of Trumps tariff policy has been a huge surprise which has amplified three key risks: higher inflation, lower and possibly slower growth in the US and with that the prospect of lower corporate profitability.
In a surprise reversal of fortunes, stocks in China, Europe and the UK have delivered positive returns while fixed income assets have also retained it’s value and are marginally up providing support to a multi-asset portfolio.
Firstly, we have moved to mitigate the risk in the portfolios, reducing our US equity exposure to underweight and increasing our exposure to alternatives to diversify the portfolio, limit portfolio volatility and further mitigate drawdown risk. In addition, we have added to Europe to take advantage of the opportunities in European equities as a result of the improved economic outlook.
We encourage investors to a keep long term perspective. Short-term market volatity also provides the opportunity to buy good quality assets at cheaper prices allowing the portfolio to benefit from higher starting yields and with that allowing the portfolio to compiund good returns over the long-term. As a result we encourage investors to remain invested.
Andrea Yung: It has been a volatile period for markets so far this year, following the increased threat of a global trade war. There have been large disparities in terms of performance across different regions and asset classes.
Bonds held up relatively well over the quarter as investors sought refuge in lower risk assets such as government bonds. This is why our lower risk models, which tend to have a larger allocation to bonds have held up better relative to our higher risk models.
However, what is reassuring is we have been able to provide a slightly higher degree of protection on the downside in these higher risk models, relative to the benchmark.
It’s important to remember than market corrections are common place in equity markets. We have seen this in recent years during the pandemic in 2020, we’ve seen it in 2022 when there has been increased inflation and interest rates. As history has proven, the long-term trend shows that markets recover and grow over time.
Looking at our performance over the long-term, despite the recent market downturn, our models have provided strong performance since inception. It’s important to remain diversified and this helps to manage risk and provide stability. We take an active and long-term active approach to investing and corrections like this can present good buying opportunities for investors.
Towards the end of last year, we cited concerns around the potential vulnerabilities of the mega cap US growth companies that have driven returns, we’ve reduced our exposure here in favour of quality companies that are more reasonably valued and we have continued to do so in recent months. This has led to us being better positioned to navigate through the turbulence that we have seen so far this year.
As we anticipate that volatility may continue in markets, we are keeping an overweight position to our alternative assets, these aim to provide a degree of protection during market weakness. These types of assets exhibit low volatility, have a strong focus on risk management, and have actually provided resilience for us in the face of weaker equity markets.
We are also maintaining our exposure to government bonds, which we believe will hold up well if markets do experience a downturn.
We have a strong focus on risk management within our investment process, by assessing how our investments could perform in different market conditions, this ensures our portfolios are well diversified by investing across different asset classes and different regions. This allows us to minimize exposure to any single market and helps us to smooth out returns.
With our long-term, actively managed approach, we aim to be well-positioned to capitalize on any emerging opportunities while trying to navigate the volatility of markets. This approach ensures that we remain focused on strategic decisions and avoiding the impulsive reactions to short-term market fluctuations.
2plan Wealth Management is authorised and regulated by the Financial Conduct Authority. It is entered on the Financial Services Register (www.fca.org.uk) under reference 461598. Registered address: 3rd Floor, Bridgewater Place, Water Lane, Leeds, LS11 5BZ. Registered in England and Wales Number: 05998270